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3 May, 2019 - 12:38 By Kate Sweeney

East of England’s industrial sector in huge demand as retail falters, says RICS

warehouse RICS

The East of England commercial property sector is being driven by demand for industrial units as interest in retail continues to falter, according to the Q1 2019 RICS UK Commercial Property Market Survey.

Alongside this, anecdotal evidence suggests a lack of movement on Brexit continues to deter investors and occupiers across the board.

At the headline level, demand for the East’s commercial property dropped in Q1 2019, being mainly driven by the lack of interest in retail units. 

Some 37 per cent more respondents reported a fall in the first quarter of 2019. Interestingly, the rise in online shopping continues to sustain the industrial sector where respondents continued to see a steady rise in tenant demand.

Demand for the East of the England’s industrial units continues to outpace supply. This quarter, respondents reported a fall in the number of available units for sale, resulting in more respondents expecting rents to rise in the coming three months. 

The latest survey data also supports recent reports on the number of empty shops on the region’s high streets, as the number of vacant retail units have been increasing over the past 15 months. Also, the latest survey shows, a fall in the availability of office space.

With the increased availability of retail space, inducements and incentive packages for landlords, picked up this quarter, with 33 per cent of respondents reporting a rise rather than a fall in incentives.

Not surprisingly, as the Brexit debate rumbles on, respondents are reporting an impact on domestic investment enquiries for the East’s commercial property. 

At the all-sector level, new enquiries fell for the second successive quarter. Once again, the retail sector is the hardest hit with 52 per cent more respondents reporting a fall. 

The region’s office sector also saw a decline in interest this quarter, with industrial being the only area of the East’s market seeing investment interest.

Overseas investment demand for the East of England also fell this quarter, with all areas of the regional market seeing a decline in interest. 

As investment decisions stutter, 50 per cent of respondents continue to sense the market is in the early to middle stages of a downturn, with anecdotal evidence linking this to the lack of clarity coming from Westminster.

To assess the impact Brexit is having on the market, in each quarter since the Brexit vote took place, survey participants have been asked if they have seen any evidence of firms looking to relocate at least some part of their business as a result. 

This question – asked at a national level – has shown, in each of the two previous quarters, the proportion reporting they had seen signs of this type of activity came in at around 24 per cent. 

Interestingly, however, this picked up to 33 per cent in the latest results. Going forward, a slim majority (53 per cent) of respondents nationally do now expect relocations to occur. Of course, whether or not firms do decide to relocate will still depend on how the negotiations unfold from here on.

Alan Matthews, of Barker Storey Matthews in Huntington, commented: “There is no doubt that the uncertainty of Brexit is being felt across the board. I believe the outlook for our region in the medium to longer term is positive but expect to see considerable volatility over the next 12 months and possibly longer.”

Tarrant Parsons, RICS Economist, said: “Trends across the UK commercial property market in the early part of 2019 have continued in a similar vein to those reported last year.

“The industrial sector remains a clear area of strength while the retail sector continues to be challenged by the growth in e-commerce. Brexit uncertainty is again cited to be a negative influence on market activity, causing some occupiers and investors to hesitate as they await further clarity on the future direction of policy.”

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